Bloomberg News

Asian Currencies Climb for a Fourth Week on Inflows, Fed Outlook

January 29, 2012

Jan. 28 (Bloomberg) -- Asian currencies rose for a fourth week, spurred by demand for higher-yielding assets after the Federal Reserve pledged to keep interest rates near zero through late 2014.

The Bloomberg-JPMorgan Asia Dollar Index climbed to a three-month high as money managers plowed more cash into regional bonds and stocks. Malaysia’s ringgit hit a four-month high and India’s rupee touched the strongest level in 11 weeks. Gains were limited by concern Europe will struggle to forge a debt-swap deal involving 206 billion euros ($270 billion) of Greece’s repayment obligations.

“Regional currencies got a big boost this week from speculation that low interest rates in the U.S. will encourage fund inflows,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Still, with Europe’s debt concern lingering, it’s hard to see a sustained gain from here.”

The ringgit appreciated 2.2 percent to 3.0388 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. The rupee gained 2.1 percent to 49.315 and touched 49.295 yesterday, the highest level since Nov. 9. The Philippine peso and South Korea’s won advanced 1 percent to 42.85 and 1,123.20, respectively. Thailand’s baht strengthened 0.7 percent to 31.31.

The Asia Dollar Index rose 1.8 percent this month, the most in a January since 2006, as central banks in India, Thailand, Indonesia and the Philippines eased credit conditions to bolster economic growth.

U.S. Interest Rates

The Fed said on Jan. 25 they saw “exceptionally low” interest rates through 2014, having previously pledged to refrain from raising borrowing costs until at least mid-2013. The central bank kept its target rate between zero and 0.25 percent, unchanged since December 2008, to secure a recovery from the global credit-market crisis. Greece needs to repay 14.5 billion euros of debt in March.

Emerging-market bond funds saw inflows of $907 million in the week through Jan. 26, Barclays Capital said in a note to clients yesterday, citing data from EPFR Global. Investors bought $1.4 billion more stocks than they sold in South Korea, the Philippines and Thailand in the first four days of this week, exchange data show.

The ringgit and the peso were little changed yesterday as a technical indicator, the so-called relative-strength index, signaled the dollar was poised to rebound against them.

‘Technical Correction’

“It’s the start of a technical correction,” said Rafael Algarra, executive vice president and head of financial markets at Security Bank Corp. in Manila. “We’ve seen a run on the peso mostly because of the offshore news. People are looking for an excuse to take profits on this long run.”

Policy makers in Thailand and the Philippines lowered benchmark interest rates this month. India cut the cash reserve ratio for banks on Jan. 24 and Indonesia lowered inter-bank lending costs on Jan. 17. Bank Negara Malaysia will keep its overnight rate at 3 percent at its Jan. 30 policy meeting, unchanged since May 2011, according to all 14 economists in a Bloomberg News survey.

Elsewhere, Indonesia’s rupiah declined 0.2 percent yesterday to 8,983 per dollar, taking its loss this week to 0.4 percent, according to prices from local banks compiled by Bloomberg. The Vietnamese dong fell 0.6 percent to 21,023. Financial markets in China and Taiwan were closed all week for the Lunar New Year holiday.

--With assistance from Yumi Teso in Bangkok and Lilian Karunungan and Kim Kyoungwha in Singapore. Editors: Anil Varma, James Regan

%VND %KRW %KRW %USD %SGD %THB %PHP %TWD %IDR %MYR %HKD %CNY

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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